Pet Insurance Legislation Unexpectedly Delayed — Again

“We’ve been working like dogs,” Pet Insurance Model Law working group chairman Donald C. Beatty told his group of state insurance regulators gathered in Columbus, Ohio on August 16–many seeing each other in person for the first time since December 2019, the last national meeting of the NAIC (National Association of Insurance Commissioners) to convene before America shut down for the pandemic.

Mr. Beatty’s pun – “working like dogs” – drew laughter from the regulators at the Monday morning meeting, which TCR attended virtually.

Here’s how the Property and Casualty’s Insurance Committee (which includes pet insurance because pets are considered property) listed the Pet Insurance Working Group on the agenda as follows:

Property and Casualty Insurance (C) Committee(Monday, August 16, 10:30am ET)

The Property and Casualty Insurance (C) Committee will consider the adoption of the Pet Insurance Model Law, which is currently under revision by the Pet Insurance (C) Working Group and seeks to establish appropriate regulatory standards for the pet insurance industry and promote the public welfare by creating a comprehensive legal framework within which pet insurance may be sold. As currently drafted, the model law requires insurers transacting pet insurance to make various disclosures to their customers and sets out additional disclosure requirements for insurers that wish to exclude certain coverages on the basis of preexisting conditions or impose waiting periods upon the effectuation of a policy.

Mr. Beatty, whose comments to the Property and Casualty Committee – pet insurance in the US is classified under as a property and casualty insurance product-  went just over two minutes, explained to regulators that following the group’s thought-to-be final meeting at which the Pet Insurance Model Law was adopted, “several working group members as well as NAIC staff spotted some edits,” and ultimately proposed six total edits.

“Whether or not [the edits] are substantive may or may not be in the eye of the beholder,” Mr. Beatty continued. “What I’m asking for today is to continue the working group, because I would like all working group members to weigh in on the proposed edits.” He added, “We’ve had great participation from the veterinarians, consumer reps, and the industry. And I would like to be able to hold a public call to allow them to weigh in. So, we’re asking for more time to allow the working group to continue and finish our work. Our goal is to get the Pet Insurance Model Law done so it will be ready for adoption at the next NAIC meeting.” The next NAIC meeting has not yet been scheduled, but supplemental materials from the Working Group as well the day and time of the next meeting can all be found here and FYI: pet insurance working group meetings are public.

In a brief telephone interview following his appearance before the Committee, Mr. Beatty declined to specify whether the proposed edits were limited to “typos,” as he indicated during the meeting, but he did say that none of the proposed edits related in any way to the last major impasse and controversy of the group: waiting periods after insurance had been bought before a new illness could be covered.

Insurers Threaten to Oppose the Legislation

It took hutzpah for Mr. Beatty to show up in Columbus for the NAIC meeting.

That’s because in late July, the lawyer for NAPHIA Cari Lee, the pet insurance industry’s trade group, told state insurance regulators that NAPHIA would not support any legislation that included language that restricted an insurance company’s ability to implement lengthy waiting periods.

“The waiting period language really is a line in the sand,” lawyer Cari Lee said. “It will be something we will oppose and will result in us, very likely, opposing the model.”

Consumer representatives blasted Lee’s statements in comments submitted to the Working Group, charging that “NAPHIA’s comments also reveal their belief that they have veto power over regulator actions they don’t agree with and, having failed to win their argument on the merits, NAPHIA’s members will attempt to use their financial and political muscle to cow regulators to NAPHIA’s will.”

Mr. Beatty said he understood but that “the waiting period concept generally is kind of a tough sell,” adding, “And, as Mick Jagger said, ‘You can’t always get what you want.’”

NAPHIA’s position has not changed according to Mr. Beatty, who also told TCR that he and his colleagues had no intention of seriously entertaining any efforts to change the waiting period language.

 Six-month orthopedic waiting periods get an unexpected ally: Trupanion

We regret to complicate the issue for Mr. Beatty, but those ‘tough-to-sell’  six-month orthopedic waiting periods have an unexpected ally: Trupanion CEO and founder Darryl Rawlings, the guy more likely to be found taunting the competition for selling deceptive products than throwing support behind them; especially over an issue like waiting periods. But Rawlings says waiting periods aren’t the issue. He suggests that companies should make the rules with just one exception where he says he does see an important role for regulators, which is transparency.

Although Rawlings claimed not to be familiar with the legislation, or even to have read it, he certainly seemed to know a lot of details. By transparency, he was likely referring to the robust disclosure requirements in the legislation that pet insurance companies would be held to. However, NAIC-appointed consumer representatives Birny Birnbaum and Brandon Bridgeland have both argued that at large volumes, disclosure requirements only encourage consumers not to read the language.

“I don’t think it’s up to the Department of Insurance to design products,” Rawlings said in a telephone interview on August 6, two days after the model legislation was adopted by the group. “I don’t care if a company has a two-year waiting period. What I do care about is that the consumer is aware of it.” He continued:

“You shouldn’t legislate that you can’t have them. You should legislate that it needs to be clear and transparent for the pet owner. Regulators can come up and say, ‘I want you to pay for a dog sitter for the rest of the pet’s life.’ We could. We could put that in the price. Do consumers want it? Maybe they do, maybe they don’t. Consumers should have the choice. They should understand what they’re getting. On that point, I do agree.”

Asked if he supported NAPHIA’s stated intention to oppose the legislation, Rawlings insisted that he had not read the legislation. “I don’t even know what the law is,” he said, adding that he had not read it and therefore would not take a “yes” or “no” position.  “I think that’s the place of the industry,” Rawlings said after we summarized the language in question about waiting periods.  “Companies should do it,” he said, referring to if and how to implement waiting periods, “but I’m also supportive of transparency.” 

In fact, Rawlings insists that in his ideal world, regulators would require insurers to put large banners on the front pages of their websites disclosing the amounts per dollar they aim to spend on actual claims payout. “I happen to pay 71 cents on every dollar,” Rawlings says, adding that Trupanion’s competitors spend about 50 cents on every dollar. “Guess what? I would like the departments of insurance to require that transparency.”

Asked why Trupanion’s lawyer barely talks at the meetings or advocates for what he just laid out at meetings, Rawlings offered: “Maybe he advocates for it with the regulators and not at the meetings. Because if he advocated for it at the meetings, the other companies would throw eggs at him.”